Sustaining Success

Edward J. RayOregon State UniversityOctober 9, 2014

I thank the President and members of the Faculty Senate for this opportunity to discuss the state of the university. My comments this afternoon focus on four topics: -- the success of the Campaign for OSU and all we have accomplished in the last 10 years, the current financial state of the university, our progress in creating a just and inclusive community, and the challenge of sustaining success in the next 10 years.

Celebrating Success

The changes at Oregon State University effected over the last 10 years are nothing short of extraordinary. We have been blessed by exceptional leadership in key areas, including the Faculty Senate and academic and support units. Our collective commitment and discipline to create and implement strategic planning throughout this period, now reflected in SP3.0, have been essential to our success. But our faculty, staff and students remain the lifeblood of this community, and without their talents and hard work, we simply would not have realized the positive change we see around us.

Over the last 10 years, enrollment in Corvallis has increased by 37.5% to 25,114, and our on-line enrollment of degree-seeking students has increased by 374.6% to 4,248. Our international student enrollment has increased from 928 and 4.7% of our enrollment in Fall 2007 to 3,982 and 13.1% of our enrollment this fall. Over the last 10 years, our enrollment of U.S. minority students increased from 13.7% in Fall 2004 to 20.6% today. In addition, we are moving to create a four-year branch campus, OSU-Cascades, on a stand-alone site in Central Oregon, and, as part of a university-wide Marine Studies Initiative, we are beginning development of a Marine Studies Campus in Newport.

Despite the shock of the Great Recession, this deliberative body responded to recommendations from colleagues across the university to accommodate these changes. You acted to eliminate 26 low-enrollment majors; consolidated 62 colleges, schools, departments and programs into 42; improved the baccalaureate core; and overwhelmingly approved a resolution during the worst of the recession to require furlough days for faculty so that staff colleagues could keep their jobs. Those decisions and many more positioned us to increase our faculty instructional base from a low of 1,107 in 2004 to 1,489 today and our academic support staff from a low of 2,925 in 2004 to 3,338 today.

These and other forward-looking actions by you and our colleagues, guided by our strategic plan and coupled with outstanding leadership at the OSU Foundation, prepared the way for the remarkable success of the Campaign for OSU. Alumni and friends of the university learned about our excellent faculty and students and saw the foresight and skill with which we addressed the challenges we faced. They recognized that unprecedented, positive change was taking place at Oregon State University, and they wanted to be part of our team.

The totals for the campaign will be tallied at the end of this calendar year, and the campaign celebration will be held at the end of this month, but we know enough now to count the campaign much more successful than anyone could have imagined when it was launched in 2007. At the end of September, the Campaign total stood at nearly $ 1.1 billion ($1,096,411,107), with more than $108 million raised in the last fiscal year, the fifth time during the campaign we have surpassed the $100 million mark in annual fundraising totals. By contrast, in FY03, the university raised about $30 million.

The real story of course is what happened inside the campaign and across the university. We have added 77 endowed faculty positions. We have established more than 600 new scholarship and fellowship funds, with campaign support for students now standing at $184 million, and we have combined donor, state and university funds to undertake 30 major construction projects valued at more than $727 million. Support for our efforts has been incredibly broad, with more than 105,000 donors contributing to the campaign so far.

Financial Self-Sufficiency

Turning to the financial state of the university, the forecasts for state revenues for the next several biennia remain fairly stable, with some growth expected. But the state faces legal challenges to PERS reforms adopted in 2013 that, if upheld by the courts, could reduce funding this biennium and beyond. Furthermore, the process for setting and allocating state funds for higher education remains unclear. The Higher Education Coordinating Commission, the HECC, has indicated its intention to move away from the long-standing funding formula used by Oregon University System to support universities. The HECC will adopt an outcomes-based funding model whose elements are not known at this time. Meanwhile, even before assuming full responsibility for the governance of this institution, the OSU Board of Trustees has acted quickly in support of the university. The Board reconfirmed our mission statement and approved budgets for FY15, as well as our state funding requests for the next biennium for operating and capital accounts, which we submitted to the HECC last March.

Oregon’s public university presidents --through our Presidents Council --submitted a common operating budget request to the HECC that would largely return us to the overall level of state funding we received in 2007. The presidents also agreed on a general prioritization of capital budget requests to the HECC. In addition, we have worked with leaders in our statewide programs and constituent groups to establish a budget request to the HECC for our statewide public service programs that is $16 million above the current service level. The Legislature provided funding to support zero resident undergraduate tuition increases for FY14 and FY15, and we are working to ensure that funds to cover the costs of that tuition buy-down are put into our base operating budget.

The course of federal funding for research remains uncertain, and the prospects for substantial increases in the foreseeable future are remote. Yet, overall funding for research at Oregon State University reached $285 million for FY14, an increase of 8% over FY13. That gain was largely attributable to an 11% growth in federal awards, from $154 million in FY13 to $171 million in FY14. Industry R&D investment reached a record level $37 million for FY14; this category has grown 50% over the past five years. Likewise, over the past four years, the licensing revenue component of industry R&D investment has grown 120% -- from $2.7 million to $5.9 million for FY14.

Overall enrollment growth was 5.8% last year and is expected to be 2.1% this year. We funded a full-year, 3% merit raise package for unclassified staff in July 2014. We are working with the colleges to address equity and salary compression issues for fixed-term instructional faculty, including raising minimum salaries and developing more comprehensive assessment tools for promotion and a compensation scale that acknowledges experience and advancement. We are exploring ways to address the medical coverage needs of part-time faculty who are appointed to more than 50%-time positions through multiple appointments across public universities that were part of the Oregon University System. Furthermore, the provost will work with the Faculty Senate to develop longer term contract options for fixed-term faculty. We brought 17 new tenure-track faculty to the university this year through central funding, and we have authorized 40 new tenure-track hires for next year. We closed FY14 with a fund balance of 8.4%, well within the State Board of Higher Education’s recommended range of 5-10%, and we expect a fund balance of around 8% for the end of FY15.

If we continue to meet our targets, and absent a dramatic drop in state funds for higher education or substantial changes in the formula for allocating state funds to higher education, we expect to continue to provide faculty with annual merit raises on the order of 3% per year and to authorize 30-40 new faculty hires, along with academic support staff, each year for the next several years, with end-of-year fund balances within the 8% to 10% range. We will continue to closely manage our enrollment targets and mix, which are critical contributors to our ability to build faculty and staff capacity.

We are working with constituents to make the case for real increases in funding for the statewide public service programs. After California, Oregon has the second most diverse agricultural economy in the nation. We cannot simply scale our staffing up and down as statewide budgets change and mostly decline. Funding cuts have forced us to eliminate staff expertise in some commodity areas and undercut staff effectiveness by increasing the territory covered by commodity experts. Oregon communities east of the Cascades are disproportionately punished by cuts in support of our statewide public service programs because of the vast area and diversity of the agricultural base to be served.

Equity and Inclusion

We continue to develop a just and inclusive community on campus and in collaboration with partners throughout Corvallis and Benton County. We are proving that excellence is achieved through diversity. The percentage of high-achieving student freshmen among entering Oregon high school graduates has increased in the last decade from 31.6% in Fall 2005 to 44% this fall, while student diversity has increased from 13.7% in Fall 2004 to 20.6% this fall, and faculty diversity has increased from 9.5% in Fall 2005 to 12.8% in Fall 2013.

In Strategic Plan 3.0, the first goal we list is: “Success that transforms our learners and the world.” The Leadership Council for Equity, Inclusion and Diversity has made specific recommendations to close the achievement gaps in graduation rates among student groups and achieve a common graduation rate well above the current 61.5%.

Six-year graduation rates did improve between the entering classes in 2000 and 2007 from 41.2% to 55.2% for American Indian/Alaskan Native students, from 33.3% to 49.2% for African American students, and from 47.1% to 53.4% for Hispanic students. But, for students who fail to graduate, while debt accumulates, success delayed often gives way to dreams denied. Under the leadership of Susie Brubaker-Cole, our vice provost for student affairs, we launched a number of initiatives last year to improve first-year retention rates and six-year graduation rates for all students. Initiatives include: the live-on policy, academic advising enhancements, small-group peer mentoring, enhanced living-learning communities, cohort-based intensive support programs, cultural center enhancements, a BaccCore first-year skills requirement, gateway course enhancements, and intrusive advising for negative academic standing. We must monitor and perfect these initiatives to close achievement gaps and truly transform lives.

To that end, following the recommendations of the Leadership Council for Equity, Inclusion and Diversity, the provost will create an Office of the Vice Provost and Dean for Undergraduate Studies to provide university-wide coordination of academic, student support, and engagement programs. The new office will be tasked to create a Center for Experiential Learning, including undergraduate participation in faculty research projects and industry internships. Furthermore, OSU is the first West Coast member of a consortium of universities called Unizin, which includes the University of Florida, Indiana University, and the University of Michigan, among others, who will collaborate to create a new learning ecosystem.

Sustaining Success

Let me turn now to sustaining and enhancing our recent success. It has been said that the seeds of failure are sewn in success. The natural inclination to stick with what has worked in the past, to not mess with success, is very powerful. History is replete with examples of nations, governments, institutions and businesses that lost dominant positions because they failed to recognize the forces of change around them that made business as usual a recipe for failure. So, even as we celebrate this year, we must survey the landscape and assess whether the opportunities we seized and the challenges we met in the last decade will persist for the next 10 years. And we must identify new opportunities, challenges and innovative solutions.

We look forward with the advantage of having our own Board of Trustees for the first time in 80 years. Appropriately designated, our trustees hold the promise of this university in trust. As a continuous source of oversight and guidance, the Board will ensure that OSU remains true to its mission of service to the people of Oregon and the nation. We must never forget that we seek excellence in everything we do to benefit our students and those we serve.

I ask the Faculty Senate and the provost to convene conversations to provide the university Board of Trustees with a draft white paper for discussion at a board retreat in September 2015. The blueprint for the future is Strategic Plan 3.0, and the white paper is the business plan to accompany the strategic plan. Let me initiate that dialogue by sharing my perspective.

Enrollment

We experienced remarkable enrollment growth here in Corvallis in the last decade – 37.5% -- and much of that growth was associated with increased recruitment of out-of-state students and international students. In fact, international student enrollment increased from a low of 4.7% in 2007 to 13.1% today. Over the same period, although the number of Oregon undergraduates has continued to increase at Oregon State University, the percentage of Oregonians among undergraduates at OSU has declined from 86% to 74% in the last five years. Our current goal is for Oregonians to comprise at least 66% of our undergraduate student population.

While we must continually increase diversity among our students, we have set a target of 28,000 for resident enrollment in Corvallis. I do not recommend raising that cap in the foreseeable future. In effect, some of the enrollment changes in Corvallis that have driven revenue growth in the last decade are now playing themselves out and cannot be counted upon to meet future revenue needs.

By contrast, enrollment at OSU-Cascades has grown quickly in the last few years, but the prospects for enrollment growth are even greater looking forward. The creation of stand-alone, four-year undergraduate programs and construction of a separate campus for OSU-Cascades should attract many more students from Central Oregon, the rest of the state, the nation and the world. The latitude to recruit non-resident students to OSU-Cascades will generate revenue there for many years.

There are two factors contributing to enrollment-related revenue growth in Corvallis. First, we continue to experience double-digit growth in our Ecampus enrollment, and our rating as the No. 4 on-line program among research intensive universities positions us well in this area. While many lament the rapid rise of on-line education, the creation of MOOCs, and private-education on-line entities such as Coursera, we can be a leader in the creation and use of the best new learning technologies. Second, while we continue to struggle to meet growing enrollment demand pressure for courses in engineering, public health, business, agriculture and other areas, we are making progress through strategic hires in all of those fields. Furthermore, the HECC is developing a new funding model for universities and community colleges based on outcomes such as graduation rates and degrees awarded to students in general and, more specifically, to students from historically under-represented groups and rural communities. Our focus on improving retention through to graduation for all students should serve us well in meeting the requirements of the new funding formula.

Capital Projects

Earlier I mentioned the number of major projects and the dollar value of construction undertaken in the last 10 years at OSU. Even now, we are celebrating the opening of Austin Hall, construction of the Asian and Pacific Cultural Center and the Lonnie B. Harris Black Cultural Center, renovation of the Memorial Union and construction of the Student Experience Center, completion of the new classroom building, the opening of the William Tebeau residence hall, and groundbreaking for Johnson Hall. We are already planning construction and renovation of facilities for our College of Forestry, the College of Engineering and more. Yet, the center of gravity for new buildings will shift over the next 10 years to OSU-Cascades and the Marine Studies Campus.

Three factors will change the pattern of construction on the Corvallis campus. First, we have many older buildings that are in serious need of renovation, earthquake retrofitting and upgrades for compliance with accessibility needs. Second, our enrollment cap of 28,000 resident students in Corvallis will reduce the pace of growth in our physical footprint here. Finally, new technologies to create and deliver learning opportunities will also reduce our need for new built capacity.

Financial Sustainability

The challenges we face in launching a new four-year campus in Bend for OSU-Cascades and a Marine Studies Campus in Newport are daunting but they are not unknown to us. So, let me focus my remaining time on the financial challenges we face in Corvallis and how we can sustain and build upon the success of the university. Since the greatest source of revenue gains from enrollment growth in Corvallis could come from the expansion of Ecampus, I urge all of us to explore how adapting new technologies to course offerings could expand and enrich learning experiences for all of our students. The second goal listed in SP3.0 is to provide leadership that integrates scholarship, creativity and collaboration throughout learning and discovery. We must harness new technologies towards that end.

On the expense side, changing demographics and the need to improve outcomes for all students will increase our operating costs. In response, we must find cost efficiencies to moderate tuition increases and slow the growing debt burden on our students.

Oregon State University has joined with 10 other major public research universities -- Georgia State, Central Florida, Ohio State, Purdue, Texas at Austin, Michigan State, Kansas, Arizona State, Iowa State, and UC-Riverside -- to form the University Innovation Alliance. We will collaborate to increase our total degrees awarded, especially for Pell Grant-eligible students, while improving the quality of our programs and managing our operating costs effectively.

Over the course of the next 10 years, I expect OSU to launch the second comprehensive fundraising campaign with goals of at least twice the total raised in this campaign and doubling annual giving. The changing profile of our students ensures that need-based scholarships will be an even greater element in the next campaign.

Moreover, as our capital needs in Corvallis shift to renovating and retrofitting many of our older campus buildings, it will be difficult to persuade donors and the legislature to help us meet those capital needs. The early readings of the legislature are not encouraging. Last year we sought $10 million in legislative funding for accessibility-related improvements but did not succeed. We will press this need in the upcoming legislative session.

The decline in state funding for the statewide programs -- extension, agricultural experiment stations, and the forest research lab -- has been difficult to manage. Scaling back funding forces cuts in the types of expertise provided and their availability where needed. Business as usual for the next 10 years would be catastrophic to towns and counties served by our statewide public service programs.

With respect to research, the university has realized remarkable success in our efforts to secure federal grants and contracts, thanks to the talent and efforts of many of you and our colleagues across campus. But overall growth of federal funds for research in the next decade will not mirror the growth of the last decade. We must increase research funding from federal and industry partners. The OSU Advantage program and our participation in RAIN-- the Regional Accelerator Innovation Network-- initiative are important steps in the right direction.

The third goal of SP3.0 is the expansion of the university’s diversity, reach and service across Oregon, throughout the nation and around the world. We cannot do that without adequate state, federal, private and industry financial support.

Conclusion

Hopefully, you share my view that assuming the past is the future is not a good idea. Even as we celebrate the success of the Campaign for OSU, we should remember our role as stewards of this great university. The extraordinary accomplishments we celebrate are the foundation for future greatness only if we sustain our momentum. I have great confidence that we will recognize our changed circumstances and manage forward successfully. I believe in each of you and that we are truly part of an excellent adventure that is far from having run its course.